Podcast Episode Summary
Podcast: Bloomberg Talks
Episode: Fed's Tom Barkin Talks Employment, Inflation
Date: September 26, 2025
Host: Bloomberg
Guest: Tom Barkin (President, Federal Reserve Bank of Richmond)
Overview
In this episode, Richmond Fed President Tom Barkin joins Bloomberg to discuss the current state and outlook of employment, inflation, and U.S. monetary policy. Barkin shares insights on the Fed’s decision-making process amidst uncertainty around inflation, the labor market, tariffs, and the implications of recent policy debates. Throughout, he emphasizes adaptability and caution in a rapidly changing economic landscape.
Key Discussion Points and Insights
1. Market Expectations vs. Fed Decision-Making
- Host’s Question: Markets expect rate cuts soon, but recent data suggest both inflation and GDP are running hot, with strong jobless claims. Should we be less confident about imminent cuts?
Tom Barkin:"I don't think you can mark to market the next meeting every week, even though that's what the markets do… Let's see what happens on the unemployment side. We'll get there when we get there."
(00:44–01:23)
2. Inflation Outlook and Tariffs' Impact
- The host notes new tariffs and skepticism about forecasting inflation.
Tom Barkin:- There are notable cost increases (tariffs, health insurance, etc.) that suppliers wish to pass to consumers, but consumers are increasingly resistant to higher prices.
- "We're seeing a lot of trading down… branded to private label… It wouldn't surprise me at all if people who are forced to accept certain price increases therefore don't buy something else… That's your classic relative price trade off. That may mean you won’t see as much broad based inflationary impact…"
(01:43–02:29)
3. Balancing Inflation and Unemployment Risks
- With inflation and unemployment both moving in the "wrong direction," Barkin reflects on the policy conundrum:
- The inflation downside is limited by consumer pushback and rising productivity.
- Labor supply is shrinking as demand falls, mostly due to demographics (retirements, immigration policy adjustments), likely containing rises in unemployment rates.
"You’ve got less labor demand, low hiring, low firing environment, but you've also got less labor supply. And that probably means that the unemployment rate increases are going to be relatively limited."
(02:42–03:55)
4. Business and Market Response to Tariffs and Uncertainty
- Businesses in Barkin’s district are acting despite uncertainty:
"I've been describing it as a fog that's created uncertainty. The fog has started to lift… A lot of businesses I talk to say, 'I've just got to do something. I can't be on the sidelines forever.' So I am seeing people more in the game."
(04:25–05:13) - However, some sectors still face greater volatility due to fresh tariffs.
5. Rate Cuts and Market Speculation
- Markets are rising on hopes of lower rates in a year. Barkin refrains from tying the Fed’s actions to market expectations:
"We are very much focused on trying to land the plane here and balancing inflation, unemployment… we're just going to have to adjust our stance as we learn more."
(05:24–05:43)
6. The Fed’s 'Dot Plot' and Policy Direction
- Barkin appreciates the Fed's dot forecast process as a forcing function for integrating policy thinking, but resists public predictions:
"I don't have it as a forecast prediction. It's not something I like to talk about publicly because it adjusts... every meeting for me is one where I want to stop and look at the balance…"
(05:50–06:21)
7. Debate Over the Neutral Rate
- Recent debate centers on where the “neutral rate” is (the interest rate consistent with full employment and stable inflation).
- Barkin references the Richmond Fed's Lubik-Mathes model, which currently signals a relatively high neutral rate, as the U.S. economy remains robust despite higher rates.
"In the real economy over the last couple years… interest rates go up and the economy stay relatively healthy. And so that model… has a relatively high neutral rate because it takes a lot of signal from the current environment."
(06:34–07:15) - He stresses uncertainty (“confidence interval of about 200 basis points”) and the importance of real-time economic signals over model forecasts.
8. Operational Rate Policy & Fed Structure
- Barkin praises Laurie Logan’s conference presentation on potential changes to the Fed’s operational rate, but withholds judgment pending further study.
- On potential Supreme Court decisions affecting Fed governance, Barkin adopts a neutral stance:
"What I do every day is show up and try to argue for the best monetary policy we can…"
(09:13–09:30)
9. Best Policy Approach: Adaptability Over Prescription
- On whether the path forward is more rate cuts or not, Barkin is explicit about remaining flexible:
"I think you have to be very adaptive to what's playing out here… I feel like very adaptive is the way to think about it… we're going to see and learn a lot as we go here."
(09:40–10:30)
Notable Quotes & Memorable Moments
-
On Market Expectations:
"I don't think you can mark to market the next meeting every week, even though that's what the markets do."
(01:08 – Tom Barkin) -
On Consumer Behavior and Inflation:
"We're seeing a lot of trading down… Branded to private label kind of choices… That's your classic relative price trade off."
(01:43 – Tom Barkin) -
On Labor Markets:
"You're seeing million three more people over 65 out of the workforce every year."
(02:42 – Tom Barkin) -
On the Fog of Uncertainty for Businesses:
"I've been describing it as a fog that's created uncertainty. And I definitely think… the fog has started to lift."
(04:25 – Tom Barkin) -
On the Usefulness of Neutral Rate Models:
"…not that helpful for making operational decisions on monetary policy... what is more helpful… is how are you seeing the economy react real time to the level of rates..."
(07:40–08:41 – Tom Barkin) -
On the Right Stance for Today:
"I think you have to be very adaptive to what's playing out here… we're going to see and learn a lot as we go here."
(09:40–10:30 – Tom Barkin)
Timestamps for Major Segments
- [00:44] – Should markets be confident in October/December rate cuts?
- [01:43] – Impact of tariffs and inflation forecasting challenges
- [02:42] – Weighing inflation downside vs. labor market dynamics
- [04:25] – Business sentiment and adaptation to uncertainty
- [05:24] – Market optimism vs. Federal Reserve’s actual stance
- [05:50] – The Fed's 'dot plot' and process for setting policy
- [06:34] – Neutral rate debates and the Richmond Fed’s model
- [08:49] – Reaction to proposals on Fed's operational rate (Laurie Logan)
- [09:13] – Fed governance and political disruptions
- [09:40] – Barkin’s ultimate advice: flexibility over prescriptiveness
Summary
Barkin’s appearance offers a candid look at the Federal Reserve’s delicate balancing act in 2025. He pushes back against the market’s constant focus on immediate moves, emphasizing uncertainty, the limits of forecasts, and the need to “be adaptive” as data and global factors shift. The conversation explores both the practical and philosophical aspects of monetary policy—how data, models, and human judgment come together amid an environment of strong but cooling labor markets, persistent (if contained) inflation risks, shifting global trade conditions, and institutional debates inside and outside of the Fed.